Analysis: A merger with Dixons - what’s in it for Carphone Warehouse?

Range extension

Carphone has a longstanding interest in broadening its product offer and extending its interests.

Its aspiration was evident in Carphone’s ill-fated tie-up with US electricals giant Best Buy and in more recent European partnerships with MediaMarkt/Saturn.

It’s also evident in Carphone’s established Wireless World store-model, on show in locations such as Westfield London, where a wider range of products, such as laptops and accessories, is sold.

Dixons would also bring buying power and the ability to negotiate exclusive rights on an extended product range to Carphone, and some of its own-brands could be sold through Carphone too.

Digital opportunity

As digital innovation races on, Dixons makes an appealing partner as ever more devices are connected by wireless services.

At present there is much talk of the ‘internet of things’ - the trend towards all sorts of technology from fridges to televisions being connected to the internet and controlled by consumers using smartphones, tablets and other devices.

Dixons would bring expertise in a much wider range of electrical and technological products than Carphone possesses.

Service extension

Additionally Dixons would be able to provide extended services to shoppers through its Knowhow arm, which has broadened its offer from the repair of goods to the provision of digital products such as movie streaming.

A combination of Knowhow and Carphone’s Geek Squad help service could make a powerful combination.

Store appeal

A presence in Dixons’ stores would also appeal to Carphone. Once seen as a weakness as sales in its categories rocketed at online rivals such as Amazon, Dixons’ Currys and PC World shops – frequently co-located – have successfully been remodeled to create competitive advantage from a bricks and mortar estate.

Dixons has successfully created reasons for shoppers to visit its branches by making the most of the opportunity to show product to best effect and explain benefits.

Such strengths have encouraged suppliers to strike exclusive deals with Dixons in the knowledge that sales should benefit from the opportunities created in-store.

Like Dixons, Carphone is very much a multichannel business and, like Dixons, sees the advantages of stores.

Carphone would likely establish a presence in Dixons’ stores, replacing Phones4U, both taking advantage of the drawing power of Currys and PC World while adding to their consumer appeal.

International compatibility

Carphone Warehouse has established an extensive network of stores internationally but, while there is some overlap in Sweden, there is little overseas crossover generally with Dixons, whose main overseas business is in Scandinavia.